Kevin G. Hall in McClatchy amps up the pressure over the fiscal cliff by claiming, with some anecdata, that it’s already impacting housing.

Both major political parties talk a good game on the need to help create jobs. But their refusal to agree on a plan to stop the government from going over a “fiscal cliff” at the end of the year is driving American businesses to delay hiring and in some cases to actually trim their payrolls […]

“The cold-eyed view is there is paralysis and it is likely to be a last-minute thing,” said Jim McNerney, CEO of Boeing Co. and chairman of the Business Roundtable, the lobby for big corporations.

In a conference call with reporters, McNerney revealed last week that Boeing is already firing workers ahead of what’s expected to be a fractious political debate that may not resolve tax and budget issues in a lame-duck session of Congress following the Nov. 6 presidential election. McNerney wouldn’t say where the layoffs were occurring or in what divisions of Boeing.

I don’t know if I’m blindly trusting the chairman of the Business Roundtable on this stuff. Especially when his tax rate is at stake. And of course, he wasn’t able to be specific.

There’s one other business owner quoted in the story, and she runs a company that makes electrical parts for fighter jets. So take her and the Boeing CEO, and you have the military-industrial complex in full swing, now planting stories in the press about the Gordian knot of the fiscal cliff (it’s a slope). Then you have trade group leaders from the Business Roundtable and the National Association of Manufacturers. Honestly, McClatchy is usually better than this.

But it illustrates a point. This pressure coming from self-interested business groups will unquestionably lead to a bad outcome. And we need to know what a bad outcome looks like. One of the clear buzz-phrases that will make you know it’s a less-than-optimal outcome is tax reform. Jared Bernstein points to a paper from his colleagues at the Center on Budget and Policy Priorities, which warns of the dangers of putting the cart before the horse in the name of tax reform:

Policymakers are increasingly discussing the need for tax reform, with a number of them calling for large cuts in tax rates — to levels well below the Bush tax rates — as a core element of reform. They contend that sweeping but unspecified cuts in tax expenditures (credits, deductions, and other tax preferences) will offset the cost of deep cuts in tax rates and, depending on the proposal, possibly generate some revenue to reduce deficits. Many who favor this approach go a step further and call for policymakers to commit to specific cuts in tax rates before they agree on any specific tax expenditures to reduce.

Such approaches pose big risks. They could produce tax “reform” that increases both deficits and inequality because while cutting “tax expenditures” sounds appealing in the abstract, cutting specific tax expenditures enough to offset the costs of substantial new rate cuts and contribute meaningfully to deficit reduction would likely prove difficult, if not impossible, to achieve. Indeed, the difficulty of cutting popular tax expenditures — from the mortgage interest deduction to 401(k) tax preferences to the deduction for charitable contributions to the exclusion for employer-sponsored health insurance — is why those who urge policymakers to commit upfront to specific, large rate cuts rarely specify any tax expenditures to cut. In fact, they often highlight tax expenditures that they would refuse to touch, such as the preferential tax rate for capital gains.

So when you commit to a lower rate without committing to designating tax expenditures for removal, inevitably you get a system that captures less revenue, almost certainly less from the rich. And seeing the frequency with which, in any time of trouble, Washington hands out tax breaks (President Obama is fond of saying that he’s signed “18 small business tax breaks” while in office; these are supposed to be the types of “tax expenditures” that go away in a tax reform effort), even with some success at the outset from tax reform, over time the tax code will get larded up with breaks once again. In addition, tax reform of this type seeks to equalize lower rates and a broadened base in a revenue-neutral package, when we actually need to capture more revenue, as we’re staring at the lowest tax collections in decades, especially on the rich.

CBPP suggests locking in the revenue target, and then the tax expenditures, before committing to any lower rates. But you could also just let the Bush tax cuts expire, and then play this game on more favorable turf.

Kevin G. Hall in McClatchy amps up the pressure over the fiscal cliff by claiming, with some anecdata, that it’s already impacting housing.

Both major political parties talk a good game on the need to help create jobs. But their refusal to agree on a plan to stop the government from going over a “fiscal cliff” at the end of the year is driving American businesses to delay hiring and in some cases to actually trim their payrolls […]

“The cold-eyed view is there is paralysis and it is likely to be a last-minute thing,” said Jim McNerney, CEO of Boeing Co. and chairman of the Business Roundtable, the lobby for big corporations.

In a conference call with reporters, McNerney revealed last week that Boeing is already firing workers ahead of what’s expected to be a fractious political debate that may not resolve tax and budget issues in a lame-duck session of Congress following the Nov. 6 presidential election. McNerney wouldn’t say where the layoffs were occurring or in what divisions of Boeing.

I don’t know if I’m blindly trusting the chairman of the Business Roundtable on this stuff. Especially when his tax rate is at stake. And of course, he wasn’t able to be specific.

There’s one other business owner quoted in the story, and she runs a company that makes electrical parts for fighter jets. So take her and the Boeing CEO, and you have the military-industrial complex in full swing, now planting stories in the press about the Gordian knot of the fiscal cliff (it’s a slope). Then you have trade group leaders from the Business Roundtable and the National Association of Manufacturers. Honestly, McClatchy is usually better than this.

But it illustrates a point. This pressure coming from self-interested business groups will unquestionably lead to a bad outcome. And we need to know what a bad outcome looks like. One of the clear buzz-phrases that will make you know it’s a less-than-optimal outcome is tax reform. Jared Bernstein points to a paper from his colleagues at the Center on Budget and Policy Priorities, which warns of the dangers of putting the cart before the horse in the name of tax reform:

Policymakers are increasingly discussing the need for tax reform, with a number of them calling for large cuts in tax rates — to levels well below the Bush tax rates — as a core element of reform. They contend that sweeping but unspecified cuts in tax expenditures (credits, deductions, and other tax preferences) will offset the cost of deep cuts in tax rates and, depending on the proposal, possibly generate some revenue to reduce deficits. Many who favor this approach go a step further and call for policymakers to commit to specific cuts in tax rates before they agree on any specific tax expenditures to reduce.

Such approaches pose big risks. They could produce tax “reform” that increases both deficits and inequality because while cutting “tax expenditures” sounds appealing in the abstract, cutting specific tax expenditures enough to offset the costs of substantial new rate cuts and contribute meaningfully to deficit reduction would likely prove difficult, if not impossible, to achieve. Indeed, the difficulty of cutting popular tax expenditures — from the mortgage interest deduction to 401(k) tax preferences to the deduction for charitable contributions to the exclusion for employer-sponsored health insurance — is why those who urge policymakers to commit upfront to specific, large rate cuts rarely specify any tax expenditures to cut. In fact, they often highlight tax expenditures that they would refuse to touch, such as the preferential tax rate for capital gains.

So when you commit to a lower rate without committing to designating tax expenditures for removal, inevitably you get a system that captures less revenue, almost certainly less from the rich. And seeing the frequency with which, in any time of trouble, Washington hands out tax breaks (President Obama is fond of saying that he’s signed “18 small business tax breaks” while in office; these are supposed to be the types of “tax expenditures” that go away in a tax reform effort), even with some success at the outset from tax reform, over time the tax code will get larded up with breaks once again. In addition, tax reform of this type seeks to equalize lower rates and a broadened base in a revenue-neutral package, when we actually need to capture more revenue, as we’re staring at the lowest tax collections in decades, especially on the rich.

CBPP suggests locking in the revenue target, and then the tax expenditures, before committing to any lower rates. But you could also just let the Bush tax cuts expire, and then play this game on more favorable turf.